Kibbutz industries chief: Strong shekel is poison

CEO Udi Orenstein: Israeli companies are moving production business overseas, because exporting from Israel is a money-loser.

"Before our eyes, manufacturing Israeli industry is becoming a nuisance and a hindrance in the campaign against the cost of living," Kibbutz Industries Association CEO Udi Orenstein warns in an appeal to the prime minister, the government ministers, and Governor of the Bank of Israel Karnit Flug, following the sharp appreciation of the shekel against the dollar and the euro.

"When government officials or economists repeatedly bewail the billions lost in an attempt to maintain an exchange rate that supports exports, or in an attempt to strengthen or encourage industrial exports, you realize that you have become a stepson," Orenstein said in his letter.

Orenstein continued, "Some will say, 'The industrialists are weeping and wailing again,' and it is true. That is probably our mistake: that we have made everything a matter of life and death: municipal property taxes, water, electricity, regulatory problems, etc. are indeed creating a burdensome situation for industry, and forcing us to look for outside solutions in countries that are cheaper or closer to the markets. These problems are burdensome, but not deadly. The current shekel-dollar and shekel-euro rates are deadly; they are a slow-acting poison."

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Later in his letter, Orenstein writes, "Israeli companies are moving production business overseas, because exporting from Israel is a money-loser. An industry cannot be maintained in the long term, and investments made in sophisticated means of production, when the future is uncertain."

The Kibbutz Industries Association has 250 members in Israel, whose exports totaled NIS 45 billion in exports in 2016.

"I know three cases in recent months in which medium and large-sized enterprises with a turnover in the hundreds of millions of shekels invested in expanding their business in the US or Spain, instead of in Israel. The state has to realize that a blow has been struck here, and industry has been hit. Unless the problem is dealt with quickly, Israel will be a terrible place for producing and exporting companies, because they are growing and selling on the one hand, and making less money on the other."

Manufacturers Association of Israel president Shraga Brosh said much the same thing yesterday, warning about plants closing down and a large way of layoffs. He cited the foreign currency crisis and the intention of two enterprises, Visonic Ltd. (TASE:VSC) and Sugat in Kiryat Gat, to reduce their activity and fire over 500 workers.

Minister of Finance Moshe Kahlon recently declared that he would soon launch a new program to benefit industry and improve its ability to compete in the markets. Kahlon said the plan would be called "Assistance to Industry." No details about it are known, however, and the content of the concessions and benefits to be offered to industrialists and exports is unclear.

Orenstein wrote in his letter, "When the Ministry of Economics and Industry was recently asked about Israel's export targets, he mentioned a growth target of 10% in the next three years. That is a wonderful target, but I have not yet heard what the state is planning to do in order to achieve it."